Is There Actually a Magic Number for Retirement Income?

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The “magic number” to retire comfortably – as worry-free as possible – has always been a hot topic between financial professionals and their clients. Do I have enough to do what I want? Did I save enough for retirement? Have I been living beyond my means? Do I have to keep working for another few years? Will I live to 100? These questions echo in almost everyone’s head, especially late at night. And, for some, they can get louder closer to retirement – when that “magic number” really matters. Luckily, there are many magic numbers.

One Magic Number Does Not Fit All

Take a look at your income before and imagine it after the gold watch. An income replacement number for retirement is often initially based on the income you have prior to your retirement. However, that figure may not apply to the actual income you need after you retire.

What’s your lifestyle now? What will it look like in post-retirement? Traveling around the world? Downsizing and becoming fulltime grandparents? Start a Second Act career? Supporting your kids if they move home? Living large and blowing it on a Porsche? Well, not everyone has retirement plans. So it doesn’t make sense that a “magic number” for one individual, couple or family is universal.

For example, let’s say your post-retirement plans include lower income needs. If so, an income replacement ratio that is too high could potentially have unnecessary taxable implications: retirees using an income replacement strategy may make excess withdrawals from their retirement accounts, which could bump them into a higher tax bracket. Conversely, if you are one of the many people who choose to put off the “good life” until you retire, your income needs may be higher.

Here’s an exercise. Identify your monthly fixed-income needs—food, housing, utilities, clothing, transportation, entertainment, medical needs, and so on—and multiply these by 12 months for a yearly snapshot. Then separate these from miscellaneous spending, such as vacations and other less frequent expenditures. This can help clarify these plans for you. Healthcare costs may also be a consideration in retirement, as these could increase from where they were in your pre-retirement years when they were less of a concern. Your employer may have paid for healthcare costs in full or part beforehand, too.

Inflation is another cost to take into account. Your annual spending projections should ideally account for 2-3% inflation per year. All together, these pieces create a snapshot to make sure the projected spending amount in retirement remains in alignment with projected costs of living.

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Longevity and Its Impact on Your Magic Number

Currently, the average life expectancy once someone reaches the age of 65 is 84 for men and 87 for women, according to the CDC. If they reach 75, men can expect to live, on average, until 86 and women 88. Many researchers think there will be a boost that may well push average life expectancy for people at 75 into the low 90s, and increase again the number of people living past 100. The future therefore could be much longer than people think, hence our focus on The Rule of 100.

No one has a crystal ball as to what healthcare costs may befall you and your loved ones. But what is important is to take into consideration the average longevity as you plan for your individual retirement needs. It’s worthwhile to consider going beyond your life expectancy, as this is simply an average of the age to which someone might live. Using a timeline up to age 90-95 is a better strategy to reduce the risk of outliving your retirement money.

Strategies to Get to Your Magic Number

Producing income to meet your needs after you retire is therefore a fulcrum that involves a delicate balance. It means preserving the assets you have diligently accumulated so they will last long enough to sustain you, while providing you with the money you need to do what you want in your retirement years.

Being realistic about your long-term spending picture over a 30-year period or longer, depending on what age you retire, is a better strategy that will help you get the clarity you seek for your own financial well-being and desire for security.

Financial professionals will continue to have these conversations with retirement clients because the truth is one size does not fit all.

At, many Americans have found financial security and peace of mind with the help of an independent financial professional. Now you can uncover powerful strategies to safeguard the “safe money” portion of your retirement monies  and deploy it for future fixed-income needs.

Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.



Author: Ian

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